A new study has found that nearly six in 10 (59 per cent) small business owners loaned personal money to their business during the pandemic to help it survive.

Research undertaken by one of Europe’s largest small business lenders, iwoca, showed that many owners had taken drastic steps during the pandemic to support their business.

Despite this, many owners are still worried about the viability of their business with more than a third (38 per cent) concerned about closing this year.

A similar survey conducted among UK accountants during the same period, representing more than 23,000 small businesses, has indicated what the most important issues are for their clients currently.

The first priority highlighted by the survey was the need to make sure businesses were well funded to deal with future disruption.

Ensuring invoices were paid was the second-biggest priority according to the study, with 48 per cent of respondents highlighting this issue.

Taking lessons from the last year, around a third of the firms surveyed said that diversifying product offerings would be key for businesses in the coming year, while 26 per cent believe that transitioning to online sales and services would be key.

When SME owners were asked the same question, 60 per cent said they will focus on ensuring they are well-funded but four in 10 small business owners still expect to need to use their own money to finance their business during the next 12 months.

Link: Majority of small businesses used personal money to stay afloat last year

To help businesses with the ongoing impact of the pandemic the Government has decided to extend measures in the Corporate Insolvency and Governance Act (the Act) to protect struggling companies.

The extension to the measures introduced in the Act, includes an extension of the suspension of liability for wrongful trading from 30 April 2021 to 30 June 2021, as well as respite for those facing winding up petitions during the same period.

Struggling businesses and their owners will welcome the extension to the removal of the threat of personal liability arising from wrongful trading, as it may give those facing the prospect of insolvency time to turn their fortunes around without a personal penalty if the company fails.

Businesses will also still be able to take advantage of the COVID-19 moratorium until the end of June, which provides a company with breathing space from creditor enforcement to enable it to enact a rescue plan.

A company may enter into a moratorium if it has been subject to an insolvency procedure in the previous 12 months.

The moratorium also covers waiving the requirement that a company subject to a winding up petition must obtain a court order and allows certain companies carrying on regulated financial activities, who would usually be ineligible, to seek the same support.

The extension to the Act also means that termination clauses continue to be prohibited. This will prevent suppliers from ceasing their supply or asking for additional payments, while a company is going through a rescue process. Small suppliers remain exempted from the obligation to supply until 30 June 2021.

In response to the extension, R3, the Insolvency and restructuring trade body, is calling on directors of COVID-hit businesses to make the most of the time granted by the Government’s extension to restructure and rebuild.

It says that business owners should use this additional time to put plans in place for when the Government support ends with the help of a professional adviser, such as their accountant, to consider the options open to them to address their financial issues.

Link: Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021

Rules coming into effect from 1 January 2022 will mean that nine in 10 estates that are not subject to Inheritance Tax (IHT) will no longer need to complete IHT forms as part of the probate process.

Meanwhile, a temporary measure that is currently in place so that IHT returns can be submitted without a physical signature will become a permanent change.

John Bunker, Chair of the Chartered Institute of Taxation’s Private Client (UK) Technical Committee, said: “We welcome that, as part of the implementation of the OTS recommendations ‘to improve the customer journey’ for IHT many families in the aftermath of bereavement will be spared the additional stress of supplying unnecessary detail to HMRC.

“The change will mean that only around 15 per cent of estates will need to complete some form of IHT return.

“The challenge for HM Revenue & Customs (HMRC) will be to design a process that meets that aim and is fit for purpose in only nine months.”

At the same time, HMRC has issued guidance for the first time on what it considers to constitute a spouse or civil partner for the purpose of IHT.

This expressly states that cohabiting partners, not in a marriage or civil partnership, are not recognised in the IHT rules.

However, perhaps surprisingly, people in polygamous marriages recognised in the UK – including those entered into such arrangements overseas in jurisdictions where they are permitted – are recognised for the purposes of IHT.

Link: Inheritance tax reporting requirements simplified

Link: Inheritance tax: HMRC update spouse & civil partner guidance – everything you need to know